There are clear, undeniable facts that we all accept but somehow don’t believe will apply to us: If we are alive, one day, we will die. There is no escaping that. And if we stay alive longer, we will grow older. Again, no escape.
However, millions of Americans do not take steps to prepare for these certainties. And this is particularly acute for the financial advisor community. We face an aging population of advisors, approximately 33% of whom do not have a succession plan. While many may endeavor to outline their succession and smooth departure from the industry, human nature seems to suggest otherwise.
With continued consolidation within the wealth management industry and tight competition for talent and books of business, advisors looking to take advantage of these trends must ask what their new firm can do to facilitate a smooth transition when it’s time for them to exit the industry.
Frankly, not asking these questions is negligent. At least once a week, I speak with a firm or team with an attractive book of business forced into a fire sale because of a lack of succession planning.
As with most aspects of this industry, planning must be done meticulously, with clear goals in mind. However, there are several steps advisors can take to make this process a bit easier.
What Your Firm Can Do for You Today
Thousands of advisors will retire in the coming years, and many joke they will die in their chairs. Transitioning advisors must understand what their new firm can do to help facilitate M&A-based growth by acquiring a retiring advisor’s book of business.
A firm should provide clear opportunities for next gen advisors to work with established members of its networks to facilitate partnerships and eventual succession-based acquisitions. Importantly, advisors must understand the kinds of financial support or funding their new firm can provide to ensure the success of these deals. At a minimum, firms should provide support to secure funding from outside sources for these advisors.
What Your Firm Can Do for You in the Longer Term
Long-term, sustained growth is critical for advisors, and support of that objective should be top of mind as advisors consider a transition. But how a firm supports the eventual monetization of this growth must be part of the initial conversation.
If a firm doesn’t have a way for an advisor to take some chips off the table or reinvest in their business, that firm lacks long-term vision. Throughout an advisor’s career, that could have a major impact on their ability to retire in the way they would have otherwise thought possible.
While it should go without saying, the firm should also support a straightforward succession planning process that puts pen to paper, providing a roadmap for the future.
What Your Firm Should Do for You as You Exit the Industry
Again, no one wants to think about their mortality, but having a clear path to sell your most valuable asset—your practice—can provide peace of mind and the financial wherewithal to enjoy retirement.
As advisors reach the transition period, they should feel confident their firm will work to find the right partner for their business. This will be more likely if the firm can secure funding for your earlier growth through internal programs, build your business through the strategic acquisition of retiring advisors’ books within your firm’s network, and develop a long-term plan for this exact eventuality.
In short, if a firm works with younger advisors to facilitate growth through strategic, succession-based acquisition, it’s more likely that the firm will be able to support an advisor when the time comes for them to step away from the business.
Advisors starting or managing a firm rarely think of succession planning, but they should before there is a critical need for transition. Transferring a business during a stressful time can compromise valuations and culture.
As advisors consider moving to a new platform, they must consider the technology, business systems and practice management support offered. But they should also identify a firm that will take a proactive role in supporting the end-of-career transition process. Finding the right partner regarding your immediate and long-term transitions can make all the difference in leading to a smooth transition to retirement.
Mark Contey is senior vice president, head of business development at LaSalle St.
